Spending more than what is earned and saved is unsustainable economic behaviour for Governments, businesses, and individuals, because it can lead to unmanageable debt.
The spender normally points to the benefits of the spending to justify the debt burden. However, regardless of the merits of these benefits, eventually the creditors will demand payment. The Government’s stated benefit is to prevent job losses in Barbados.
Recessions should be viewed as welcome corrective measures, because they force individuals, businesses, and governments to meaningfully address potential unmanageable debts. The way to effectively address mounting debt is, and has always been, to increase revenue and cut spending. When these are pursued together, temporary disruption can avert permanent damage. The more deliberate these actions, the faster the recovery. The less deliberate these actions, the longer the recovery.
The Government chose to separate these two critical activities and first tried to raise additional revenues. The proven method of raising sustained additional revenues and growing a national economy is by lowering taxes. The Government chose to raise taxes, leaving Barbadians with less disposable income, businesses with less profit, and the Government with less revenue than expected.
Government has declared that it is time to cut spending. The most responsible methods of cutting Government spending are to reduce wastage, improve efficiency, and cut wages. Government claimed to have already reduced wastage and improved efficiency. Therefore, the remaining responsible measure is to cut wages.
During our last national economic crisis, the salaries of public workers were cut by eight per cent to prevent Barbados’ currency from being devalued. However, for some inexplicable reason, the Constitution of Barbados was amended to prevent any Government from exercising this responsible option in any future economic crisis.
Since we seem to have proverbially shot ourselves in the foot, there appears to be two remaining options left for Barbados; to cut public sector employees or to indirectly cut their salaries by devaluing the Barbados dollar.
Government did not take advantage of the opportunities to cut spending and taxes at the start of this recession. This would have led to a temporary loss of jobs, which the National Insurance Scheme’s (NIS) unemployment insurance should have been robust enough to accommodate, while the national economy improved.
The likely challenges that Barbadians will face are food, transportation, utilities and mortgage payments.
To address the food issue, Barbadian homeowners should plant fruit trees on their properties as soon as possible. One breadfruit, apple, mango, and similar tree can provide food for a family and their neighbours in the community.
Planting vegetables can also provide additional food security. Surplus food can be bartered or sold in the community for other foods, goods and services.
To address the transportation costs, businesses and employees need to honestly determine whether each employee needs to be supervised in the office every day, or whether some can be trusted to work from their homes on some days during the week.
Some employees can be supervised remotely and be more productive without the stressful commute to and from the office. The businesses can benefit from lower commercial utility costs and more productive employees. If agreed productivity targets are not met, then the employee can return to the office for closer supervision.
To address utilities, homeowners should cut back on their usage by batching activities. For example, wash less frequently by washing larger loads; cook less frequently by cooking larger quantities and freezing the surplus; travel less frequently by better planning; and purchase necessary items in bulk at wholesale prices.
To address utility and mortgage payments, every Barbadian family should start and manage an Internet-based business. Services should be converted into goods that can be mass produced, marketed, and sold on-line. To make more efficient use of an individual’s time, utility payments can be transacted using Internet banking facilities.
Of course, the most important thing that we can do at this time is to rely on God. This is demonstrated by accepting each other, meaningfully helping those in desperate need, and tithing ten per cent of our revenue to a church that helps those in need.